Can anticipatory feelings explain anomalous choices of information sources?

The well-being of agents is often directly affected by their beliefs, in the form of anticipatory feelings such as anxiety and hopefulness. Economists have tried to model this effect by introducing beliefs as arguments in decision makers’ vNM utility function. One might expect that such a model would be capable of explaining anomalous attitudes to information that we observe in reality. We show that the model has several shortcomings in this regard, as long as Bayesian updating is retained. ∗We thank Andrew Caplin, Eddie Dekel, Barton Lipman, Ronny Razin and Muhamet Yildiz for helpful discussions. Financial support from the US-Israel Binational Science Foundation, Grant No. 2002298, is gratefully acknowledged. †Dept. of Economics, NYU. 269 Mercer St., New York, NY 10003, E-mail: [email protected], URL: http://homepages.nyu.edu/~ke7/ ‡School of Economics, Tel Aviv University, Tel Aviv 69978, Israel. E-mail: [email protected]. URL: http://www.tau.ac.il/~rani.